Banking used to be both simple and difficult. You either qualified for a bank account or you couldn’t get one. Choosing a bank account to open used to be simpler as well. There were only a few banks, each with a few items. Banks competed on the basis of price and service offerings. As a consumer, all you had to do was determine which bank’s branding messages appealed to your personality.
However, banking has developed. Anyone can now open a bank account; simply present your identification and evidence of residency. Even better, you can start banking right immediately without ever visiting a bank branch if you download the app. There is no paperwork required; all that is required is an internet connection. Banks are competing to attract up new clients now that it is easier to open a bank account.
Banks have had to be creative in order to offer new products that appeal to all client segments. This implies more items and greater uncertainty about which account is appropriate for you.
5 things to consider when opening a new bank account
Ultimately, the best choice of bank account depends on your circumstances. But a couple of factors can help you decide if you considering opening a new bank account.
1. Nature of Transactions
The first step is to assess your financial objectives and banking requirements. Do you need a bank account to deposit your paycheck? Or do you simply wish to keep your money secure? Evaluating your needs will provide you with information about the nature of your transactions. If the majority of your transactions are cash-based, you’ll need a cash-only account. But imagine you solely make online payments and only swipe your card when necessary. You will then explore a different account that is more suited for online transactions.
2. Value and volume of transactions
The volume of transactions you plan to perform with your bank account is the second point to consider when deciding which account is appropriate for you. To identify the best alternative for your purposes, you must also examine the monetary value of your transactions. Some bank accounts, for example, will allow you to make a specific number of free transactions per month up to a particular maximum.
The threshold might be restricted to specific transactions, such as two free transactions in a given category. Alternatively, the threshold could be set to a monetary value, such as R3000 in free cash withdrawals. Knowing the value and kind of the majority of your transactions will help you save money on transaction fees.
Competition for customers keeps banks on their toes, pushing them to reinvent their present products and service offerings. Some banks now specialize their offers for certain target consumers, so if you suit the target market for a given account, you will likely profit more from that product. With the proliferation of internet banking, you may wish to examine the ease of use of the bank’s online and mobile banking systems.
The majority of these platforms are developed with usability in mind, however it would be beneficial if you could test out which platform works best for you. Unfortunately, at the time of writing, no South African bank offers a sample account that allows consumers to test drive some of the features before committing to register an account. Finally, if you require cash, you may wish to examine the availability of ATMs.
You’ve surely observed that some bank ATMs in malls and retail centers always have extremely long lines. Others only have ATMs within supermarkets and complexes that are closed after business hours, which means you may struggle if you need to deposit or withdraw cash for an emergency after hours or on weekends.
4. Banking Costs
The last two factors on this list consider the value you get from your bank account. You have to be aware of the costs involved in your bank account; else, excessive banking fees will derail your financial goals. Some of the costs you will have to consider include monthly account fees also known as the account maintenance fees, service fees and the transaction fees attached to some categories of transactions. Some banks will bundle the service fee together with the account maintenance fee.
Generally, there are two price options to choose from. You can either go with a bundled option that includes a range of transactions and services at no extra cost. However, this does not mean you can do an unlimited number of transactions with your account. You will have to be aware of the additional costs you will incur if you exceed your account limits. Pay as you use (PAYU) is now a popular option with most entry-level accounts. These types of accounts usually have zero or very low monthly account fees from as little as R5.
The choice of either a bundled option or pay as you use depends on your circumstances. As mentioned earlier, this is where you consider the nature of your transactions. If you perform low volume, low-value transactions, you will probably benefit more from a PAYU account. But as the number and value of your transactions increase, there is probably a bundle option that is most suitable for you.
Sometimes, the choice of a bank account will come down to the rewards that you stand to benefit from your bank account. Rewards have become an important element in most banks’ strategies to attract and retain customers. Most banks now have rewards programs that will reward you cashback and discounts on your purchases with certain merchants. Alternatively, you can be awarded points that can convert into cash, or you can use them to buy airtime, pay for account fees, or buy products at participating partners.
So if your favourite merchant, say your favourite store or garage, gives extra rewards to clients who pay with certain bank cards, opening an account with partner banks will open new opportunities for you to benefit from some of the reward programs whenever you spend.
Choosing a bank account can be overwhelming. There are now many banks to select from, ranging from the traditional big five to include the challenger banks. Some are completely digital with no brick and mortar presence. Others offer the best of both worlds. If you are considering a new bank account, you will want to make sure the account you choose gives you the best value. You will need to evaluate your financial goals and look out for the account that comes with costs and rewards aligned to your financial goals.